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January 28, 2005
GICS 35: Buying More MRK Friday, January 28, 2005 13:50:20
Do you recall the MRK Accumulate recommendation I published on November 7? Well today Wall Street is all over themselves to get you to sell Merck (NYSE: MRK). Guess who's buying it? Yes, I suppose in that regard I've got a lot of company on Wall Street " you know from those people who tell you to do one thing while they do another.
Today the "news" on Merck is that (i) the SEC is investigating the company further with respect to its number one seller VIOXX, and (ii) the courts have decided that a 2018 expiring patent will expire in 2008 for what is Merck's number two selling drug.
How good can it get?
Wall Street and Jimmy Buffett (sorry, HRH Warren) want you to buy a dog like Gillette (NYSE: G) at a 33 PE, but they don't like the fundamentals or the technicals on MRK. That's fine by me.
Who out there really liked my first Merck recommendation?
Yes this one in TraderWizard: Merck & Co (NYSE: MRK) Nov 5 close: $26.21 RECOMMENDATION: ACCUMULATE. Strategy: Write MRK=PX April 2005 Puts Strike@22.50. Price at the market close Nov-05: $1.05.
Well, in 60 days we closed those at a dime. Today, even after the double slam to the MRK stock price, you could still buy back that short put at $0.25, for a 76 percent gain in eleven weeks.
No matter, some of you will continue to listen to Wall Street, and TH's like Jim Cramer, who say they just HATE the stock.
So let's get back to my reasons for buying more MRK. It's all in my November 7, 2004 report. And BTW, please note that my year-end 2005 target of $32 was actually met on December 22. So that was actually an early Christmas present " just a year early!
Ka-ching!!
You can re-read my report on Merck. Nothing's changed. Same old. Same old.
So where to from here?
Why not do the same trade?
This time, we'll write the MRK Apr5 27.5 Put (OPR:MRKPY.X) at $1.35.
I wrote in my November 7 report that I didn't mind buying MRK at $26, so now I don't mind buying it at $26.15.
As I say, same old. Same old.
Posted by Posted by Bill Cara on January 28, 2005 01:45:44 PM | Category: 35 Health Care , U.S. Dow 30